Beijing, China (BBN)-The Shanghai Composite share index in China plunged more than 6% on Thursday, the biggest fall since January.
The index, which has risen by 50% since March, ended the day down 321.45 points, or 6.5%, at 4,620.27.
Analysts cited a number of reasons for the drop, including a number of brokerages tightening lending requirements on margin financing, reports BBC.
Another wave of new share offerings due next week is also expected to remove liquidity from the market.
In Hong Kong, the Hang Seng index also ended lower, dropping 2.2% to 27,454.31.
However, shares had a better session in Japan, where the market rose for the 10th consecutive session – its longest rally for more than a quarter of a century.
Japan’s Nikkei 225 index closed up 0.4% at 20,551.46, and has now chalked up its longest winning streak since a 13-day run in February 1988.
Investor confidence was boosted by retail sales showing year-on-year growth of 5% in April, reversing three months of falls.
The Nikkei index has gained 5% during the 10-day run.
Shares of Honda were up 1.7% despite the automaker expanding its recall of cars in Japan over airbag inflators made by Takata to 340,000. Honda had already recalled millions of cars earlier this month.
In Australia, the S&P/ASX 200 ended 0.2% lower at 5,713.10 after data showed that business investment in the first quarter of 2015 saw the biggest fall for more than six years.
Investment fell 4.4% in the quarter, against forecasts of a 2.4% drop.
South Korean shares recovered from heavy falls earlier in the session, with the benchmark Kospi index closing up 0.2% at 2,117.77.